High Court of Kenya at Nairobi, Commercial and Tax Division (Njoroge Benjamin K. J.) delivered on 14^th  July 2026 in HCCOMM Appeal No. E018 of 2021, Ernest Mdio, Deborah Mshai and Harron Mwaisaka (Registered Officials of Wanidu (1998) Welfare Society) v Sidian Bank (Formerly K-Rep Bank Limited).

The Appellants, officials of Wanidu (1998) Welfare Society, had obtained a loan facility from Sidian Bank to purchase a 33-seater commercial bus, registration number KBE 361V, which was jointly registered as security. The facility was subsequently restructured, with the 2011 agreement granting the Bank discretion to vary the interest rate and, upon default, repossess the vehicle.

After the Appellants fell into arrears, the Bank's Branch Manager informed them on 22^nd  March 2012 that they were required to pay Kshs. 66,000 by 30^th March 2012, failing which the vehicle would be repossessed. The Appellants mobilized funds and made payments of Kshs. 43,500 on 29^th March 2012 and Kshs. 47,000 on 30^th March 2012.

Despite the deadline, the Bank commenced repossession proceedings on 29^th March 2012, one day before the deadline it had given the Appellants. The Appellants subsequently sued the Bank, claiming Kshs. 12,145,000 in special damages for loss of income arising from the loss of use of the vehicle.

The Trial Court dismissed the suit, prompting the appeal to the High Court.

The Court considered the following issues for determination:

       i.          whether the suit was barred by limitation.

     ii.          whether the variation of the interest rate was lawful.

   iii.          whether the repossession of the vehicle was lawful.

   iv.          whether the Appellants had strictly proved their claim for special damages.

     v.          awhether the Court could grant any substantive relief in light of the Appellants' pleadings.

The High Court held that the suit was filed within the statutory limitation period. It further found that the Bank's variation of the interest rate was unlawful and unenforceable, as the Bank had failed to demonstrate compliance with the applicable statutory requirements and had varied the rate without notifying the Appellants.

The Court also held that the repossession of the vehicle was unlawful and procedurally flawed. The Bank had acted before the expiry of the deadline it had itself given the Appellants and had failed to comply with the applicable procedural safeguards governing repossession.

However, the Court declined to award the Appellants the Kshs. 12,145,000 claimed as special damages because the alleged loss of income had not been strictly proved.

Although the Court found in favour of the Appellants on the legality of the Bank's conduct, it ultimately dismissed the appeal because the only substantive relief pleaded—special damages—had not been proved. The Court further declined to grant alternative remedies that had neither been pleaded nor sufficiently canvassed during the trial.

Contractual Discretion: A contractual clause granting a financial institution discretion to vary interest rates does not confer an unfettered power to act outside statutory requirements. Contractual discretion must be exercised within the confines of the law.

Sanctity of Contract: The principle that courts do not rewrite contracts does not shield a lender from statutory obligations. A lender may enforce its contractual rights, but the exercise of those rights must remain lawful.

Lawful Enforcement of Security: A lender's contractual right to repossess security does not exempt it from complying with mandatory statutory and procedural requirements. The realization of security must be undertaken in accordance with the law.

Special Damages: Special damages must be specifically pleaded and strictly proved. A claimant cannot rely on speculative projections of business income without sufficient evidence demonstrating the actual loss suffered.

Pleadings and Judicial Relief: Parties are bound by their pleadings. Even where a Court finds that a party has suffered an actionable wrong, it cannot ordinarily grant a substantive remedy that was not pleaded or properly proved.

The Court rejected the Bank's reliance on the “sole discretion” clause as a complete justification for the increase in interest rates. It held that contractual freedom operates within a statutory framework and that a lender cannot use a contractual provision to circumvent mandatory legal requirements.

The Court found that the Bank had increased the interest rate without notifying the Appellants and had not demonstrated compliance with the applicable statutory requirements. The variation was therefore unlawful and unenforceable.

The Court emphasized that “a commercial contract is not a sword of oppression” and that “the power to lend does not confer the power to oppress.” The decision therefore draws a clear distinction between legitimate contractual enforcement and the unlawful exercise of contractual power.

The Court found that the Bank had acted prematurely by commencing repossession on 29^th March 2012 despite having given the Appellants until 30^th March 2012 to clear the arrears.

The Court held that the Appellants had relied on the representation and mobilized funds towards compliance. The Bank's decision to act before the expiry of its own deadline therefore amounted to a breach of promissory estoppel.

The Court's observation that “the Bank cannot give a borrower a deadline of Friday and seize their livelihood on Thursday” captures the central reasoning.

The Court further found that the repossession process failed to comply with applicable procedural safeguards and that the notification of sale did not specify the exact outstanding amount. The repossession was consequently held to be unlawful and procedurally flawed.

The burden rested on the Appellants to establish their entitlement to the special damages claimed. Although they pleaded a loss of Kshs. 12,145,000 based on alleged daily income of Kshs. 7,000, the evidence presented was insufficient to strictly prove the claimed loss.

The Court emphasized that a finding that the Bank acted unlawfully did not automatically entitle the Appellants to the amount claimed. The alleged financial loss had to be independently established through cogent evidence.

The failure to strictly prove the special damages therefore meant that the Court could not award the amount claimed.

A financial institution cannot rely on a contractual “sole discretion” clause to exercise its powers arbitrarily or in disregard of statutory requirements. The sanctity of contract does not permit a lender to evade mandatory legal obligations, and the right to enforce security must be exercised in accordance with applicable statutory and procedural safeguards.

At the same time, a claimant who establishes that a lender acted unlawfully must still properly plead and strictly prove the remedy sought. A Court may make a favourable finding on liability but remain unable to grant substantive relief where the appropriate remedy was neither pleaded nor proved.

The decision therefore establishes a dual principle: the power to lend does not confer the power to oppress, but the power of the Court to grant relief remains confined by the pleadings and evidence placed before it.